Socialist Claims About Capitalism 2

Capitalism creates inequality.

Nature creates inequality. Different socioeconomic systems reward different natural inequalities – intelligence, physical health, strength, and beauty – by the incentives they create. Capitalism rewards the “bourgeois values” at which the left sneers: thrift, honesty, persistence, hard work, prudence, tolerance, and civility. Socialism rewards ruthlessness.

Material inequality is the inescapable result of material progress. If a new product is created, it cannot possibly be instantly and simultaneously distributed to every person on earth. So, the first time someone invented something – the stone hammer, perhaps – inequality instantly appeared in the world.

To demand complete material equality is to demand an end to material progress.


Capitalism results in the concentration of wealth in the hands of the few.

Wealth is more concentrated in many socialist and socialist-leaning countries (e.g., South Africa, Zimbabwe, and Nicaragua) than it is in free market countries.  Moreover, the free market automatically channels resources to those who most efficiently use them to improve the lives of consumers worldwide.  By contrast, socialism and communism have historically channeled resources to the most ruthless and murderous: Lenin, Stalin, Mao Zedong, Castro, Pol Pot, Mugabe, Ortega, Chavez, Maduro.

Trade used to mean the literal exchange of one good or service for another good or service.  Today, it more often means the exchange of goods or services for paper IOUs that we call “money.”  In a free market, money is documentary proof that the bearer has provided goods and services that others valued as demonstrated by the fact that they willingly exchanged the products of their own labor for them.

In other words, people with money in their pockets have benefitted others but have not yet received anything of comparable value in exchange. The idea that such people “owe society” or should “give back to society” is exactly backwards. They don’t owe, they are owed.


Unregulated markets result in wealth inequality.

Regulated markets result in even more inequality. In fact, much regulation is designed to enable the “haves” to retain and increase their material advantages. The problem of “regulatory capture,” in which regulatory agencies work to benefit the industries they were intended to control is very real.

First, when an agency is initially created, it needs experts on the industry it is supposed to monitor. Where can it go but to the industry itself? Second, no one has a bigger interest in lobbying the agency than do the companies being regulated. Third, if the industry were to disappear, the agency’s reason for existence would also disappear, so agency employees have a vested interest in keeping “their” industry alive, even if it’s at the expense of consumers.

Finally, there is no such thing as an “unregulated” market or “unfettered” capitalism. A company’s heaviest fetters are forged by its customers and its competitors. In a free market, no company, however large, can long survive if it doesn’t satisfy its customers with products and services that are at least as those offered by its competitors.


Capitalism is a winner-takes-all game.

Free market countries tend to have the largest middle and upper classes, which means that most people who “play the game” do quite well.

Yes, the 1% owns the lion’s share of “symbolic” or “paper” wealth, but they don’t own most of the physical wealth and they certainly don’t own more than a tiny fraction of the country’s human capital (e.g., knowledge and experience). Jeff Bezos is a multi-billionaire, but most of his wealth is in the form of Amazon stock.  He doesn’t own a significant share of the country’s houses, cars, aircraft, computers, TVs, microwaves, dishwashers, washing machines, and so on and on. Confiscating his wealth would mean that he would have to sell his stock in Amazon, which would tank its value, causing much, if not most, of that “wealth” to vanish.

Most of us are neither geniuses nor inventors, but the free market enables us to benefit from the genius and inventions of others. When someone “wins” and gets rich by producing a good or service that improves our lives, we win too.


Capitalism turns workers into wage slaves.

Slavery is an economic system in which people can arbitrarily demand others’ time, labor, and produce.  Socialism is an economic system in which the politically favored can arbitrarily demand others’ time, labor, and produce.

In a capitalist system, no one can enslave me or compel me to work. But by the same token, neither can I enslave others; I cannot compel them to provide me with food, clothing, and shelter. If I want those things, then I must either make them myself – in which case I will likely live in abject poverty – or I must produce goods and services that I can exchange for them.


Capitalism rewards merit and rewarding people based on merit is discrimination.

Well, yes. Selecting people on merit is discrimination – that is, it’s the “recognition and understanding of the difference between one thing and another.”

But if I’m faced with the necessity of choosing between candidates – whether for a job, a promotion, or for admission to a university or club – I’m forced to, well… choose. And if I have any basis at all for making the choice, then I’m looking for differences between one person and another.

My responsibility to my organization requires me to discriminate on “merit” as defined by those traits that my organization deems will best help advance the goals of the organization.


Capitalism drives corruption.

After the Civil War, corporations repeatedly tried and failed to form cartels to keep prices high and to prevent competitors from entering markets. Every attempt failed because none of the cartels could employ force to keep cartel members from cheating. Incentives to lower prices and grab market share were too great.

The problem was “solved” during the Progressive Era, when government created cartels to prevent “ruinous” competition and created agencies like the Interstate Commerce Commission, the Federal Trade Commission, and the Federal Reserve Bank to enforce the rules.

FDR’s New Deal extended cartels to agriculture and to the automotive and airline industries, while LBJ’s Great Society Medicare and Medicaid programs extended them to healthcare.

In short, progressives created government-backed cartels and monopolies and now blame capitalism for the unfortunate results.



Read Part 1 here.

Richard Fulmer worked as a mechanical engineer and a systems analyst in industry. He is now retired and does free-lance writing. He has published some fifty articles and book reviews in free market magazines and blogs. With Robert L. Bradley Jr., Richard wrote the book, Energy: The Master Resource.